Union to strike against merit pay Friday

Banks set up contingency plans to minimize inconvenience

By Nam Hyun-woo

Members of the Korean Financial Industry Union (KFIU) will stage a walkout Friday to protest the expansion of the merit-based pay system in the financial sector.

With some 70,000 union members expected to join a sit-down strike at Seoul World Cup Stadium, customer inconvenience is expected, though banks say they will do their utmost to contain the fallout.

An official at KB Kookmin Bank said customer inconvenience would be inevitable to some extent. “Though transactions through ATMs and other non-face-to-face channels will be in full operation, there will be some inconvenience for customers visiting offices for bancassurance among other services,” he said. He added that the bank has been seeking a manpower rearrangement and will implement it depending on how the situation develops.

Other officials said they have plans to “minimize customer inconvenience” and they expect the impact of the strike will not be massive, despite the KFIU pledge that it will encourage as many of its members to strike as it can. There are some 100,000 union workers under the KFIU umbrella.

“Though it may seems like all union members oppose the merit-based pay system, there are differences among employees who think they can benefit from it,” another official said asking not to be named. “So you cannot be sure about the size of the strike until the very last minute,” he added.

Observers cite the previous all-out strike by KFIU members which took place in September 2014, when they opposed government influence on financial markets.

However, the number of participants counted by police remained at some 10,000, 10 percent of the total membership, and most banks suffered no setback in operations. Weeks later the union announced another round of strikes, but suspended them.

However this time, the agenda is more about each employee’s pay, raising expectations that more union members may join the protest. Earlier, the KFIU held a vote on the strike and 95.7 percent of some 82,000 who cast ballots agreed with it.

“Many were indifferent about the previous strike, but it is different this time,” said a bank employee in eastern Seoul. “In my office, there is clear interest on the issue.”

Many industry insiders say there may be some additional strikes as labor and management lock horns with each other.

Late last month, a consultative body among financial industry employers stated that it had halted collective negotiations with the KFIU.

This was interpreted as a message that employers will push forward introducing the merit-based pay system within the year by talking with their respective unions.

With the KFIU also refusing to back down, bank officials say the impact will be greater should there be continual strikes.

Implementing a merit-based pay system has been a hot issue within the Korean financial sector this year. Public financial institutions and firms have embraced the system after feuds between labor and management and now the private sector is struggling with it.

Employers say applying a merit-based pay system is a way to survive during the current harsh financial circumstances. According to the Korea Federation of Banks, domestic banks’ net interest margin dropped from 2.32 percent in 2010 to 1.6 percent in 2015, but during the same period, the share of personnel expenses in their gross profit rose from 16.9 percent in 2010 to 26.8 percent in 2015.

However, the union claims that the merit-based pay system will allow employers to more easily lay off workers, as well as questioning the appropriateness of employee assessment standards.